Commercial Mediation in Sri Lanka 2002 - 2004
Commercial Mediation was introduced under Act No. 44 of 2000 which sought to provide for the establishment of the Commercial Mediation Centre of Sri Lanka; and for matters connected herewith or incidental thereto. Its date of Commencement was 9th August 2000.
The Centre was an initiative of four leading Chambers of Commerce in Colombo & was located at the Ceylon Chamber of Commerce where its Legal Officer Ms. K. Kalupahana prepared the groundwork to launch & manage the Centre, until a Coordinator was appointed. Mr. M. Atton, Deputy Secretary General of the Chamber supervised the work of the Centre.
The Centre was a component of the World Bank funded Legal & Judicial Reforms Project [i] of the Ministry of Justice. Prof. G. L. Peiris was the Minister of Justice & Mrs. D. Wijayatilleke , the Secretary. The latter took a keen interest in promoting commercial mediation.
Initially, the Centre was required make the business community aware of the benefits of mediating a commercial dispute by means of press releases, seminars, circulars, discussions etc.
The Centre was managed by a Board of Management consisting of business community representatives & a Justice Ministry representative. Day to day operations were handled by a Coordinator. The Panel of Mediators comprised of Professionals & Business Leaders who were trained in the practice of mediation.
Much interest was shown by the business community at the beginning, as this method of resolving commercial disputes appeared to be a cost effective & business friendly exercise.
Many of the complaints received by the Centre in the early stages related to non- settlement of bills, & these were handled by the Coordinator by appealing to the good sense of the defaulters. The need to appoint a Mediator to handle such minor disputes did not arise. If the defaulters were members of Chambers of Commerce, they invariably settled their bills after the intervention of the Centre. Even in the case of non-members, the settlement rate remained high.
Many complex disputes too were referred to the Centre, but after discussion & deliberation the parties did not agree to mediation for the following reasons:
i. the parties wished to retain lawyers at mediation sessions.
ii. the parties were of the view that if mediation failed to resolve the dispute, they would find it difficult to take up certain positions in court.
Re (i) above, at the very outset, the Board of Management of the Centre had decided not to permit lawyers to appear at mediation sessions, as the purpose of mediation was to enable the parties to arrive at an amicable settlement & the presence of lawyers would not be conducive to such a settlement.
Re (ii) above, it was difficult to convince the parties that a failed attempt at mediation would not affect a future court action on the same issue.
Nevertheless, around 5 disputes were successfully mediated during the period 2002 to 2004. Several hundred minor disputes however were settled.
Press Release from the Ceylon Chamber of Commerce
https://www.sundaytimes.lk/021215/ft/8.htm
Resolving business disputes amicably
Parties involved in a business dispute now have the opportunity of arriving at an amicable settlement of their dispute with the help of a neutral third party by mediation or conciliation.
The Commercial Mediation Centre of Sri Lanka, which is a joint initiative of the Ceylon Chamber of Commerce, the National Chamber of Commerce of Sri Lanka, the Federation of Chambers of Commerce and Industry of Sri Lanka, and the Ceylon National Chamber of Industries, was set up to meet the need of the business community for a more conciliatory approach to the resolution of business disputes.
The Commercial Mediation Centre is located at the Ceylon Chamber of Commerce building at Nawam Mawatha.
Direct negotiation between conflicting parties is the best available mode of resolving disputes, the Ceylon Chamber of Commerce said in a statement. Unfortunately, during direct negotiations, emotions often come into play and ruin the chances of arriving at a resolution. In instances where direct negotiation has failed, parties often turn to litigation.
Litigation is adversarial in nature and leads to bitterness and breakdown of business relationships, quite apart from the waste of time and money involved in pursuing them. Alternative dispute resolution (ADR) processes have evolved to meet the need for a more enlightened and business-like approach to settling business disputes.
Among them are Mediation, Conciliation and Arbitration, which involve a neutral third party. Arbitration is also adversarial in nature, and the neutral third party adjudicates the dispute in line with existing laws or industry practices and makes an award which is binding on both parties. This process may be suitable for certain types of disputes, where relationships have completely broken down and there is hostility between the
During mediation and conciliation, unlike in arbitration, the third party has no decision-making powers and his role is that of a facilitator in the negotiations between the parties to a dispute. The third party helps the parties to reach a mutually acceptable settlement and if the parties are not able to reach such a settlement, they are free to terminate the process and go in for arbitration or litigation.
The difference between mediation and conciliation is that in the latter process, the third party plays a more active role and exercises a greater influence over the outcome. The conciliator may suggest options and possible solutions and usually recommends a particular solution which the parties are free to accept or reject. The mediator, on the other hand, makes no contribution to the content of the negotiations and merely facilitates them.
Mediation/conciliation starts immediately, is generally concluded within three months, is a private and confidential process and takes place without the assistance of lawyers, and if successful, ends with a handshake. It is therefore a process which is ideally suited to the business situation.
Press Release from the Ceylon Chamber of Commerce
https://www.sundaytimes.lk/030817/ft/13.html
Mediating business disputes - the way forward
A dispute resolution process which has gained international acceptance for the settlement of business disputes is mediation. It is quick, inexpensive, leads to a mutually acceptable settlement, and does not involve the ordeal associated with litigation. A mutually acceptable settlement is one that satisfies the needs and interests of the parties, based on the facts relating to a dispute. On this basis, the parties agree that the dispute should be resolved in a particular way. If one party's interests have been affected more than that of the other, any settlement will have to reflect this reality.
During mediation, employee-representatives of the parties describe the background to the dispute, identify the disputed issues, consider ways and means of resolving the issues, and endeavour to reach an agreement under the guidance of the mediator, who is a professional from the business sector. Mediation is an informal and friendly process and even the proceedings are not recorded to maintain confidentiality.
The Commercial Mediation Centre of Sri Lanka was established to conduct proceedings for the settlement of disputes by mediation. It is a joint initiative of the Ceylon Chamber of Commerce, the Ceylon National Chamber of Industries, the Federation of Chambers of Commerce and Industry of Sri Lanka, the National Chamber of Commerce and the Ministry of Justice.
The process begins with one party making an application to the Centre. It takes no more than five minutes to fill the prescribed application form. The applicant has to furnish the contact details of the parties, a brief description of the dispute in two or three lines, and the value of the subject matter in dispute.
One of the unique features of mediation is its voluntary nature. The two parties have to agree to resolve the dispute by mediation. There is no compulsion on either party to participate in the process. This is because the process requires the parties to work together to resolve their dispute. Once two parties agree of their own free will to resolve the dispute by mediation, they will adopt a cooperative problem-solving approach in their negotiations.
Why should a party propose to mediate a dispute? A party involved in a dispute can choose mediation, arbitration or litigation to resolve it. Arbitration and litigation require the assistance of lawyers, are adversarial in nature, time consuming and expensive. Mediation is easy to initiate, quick, inexpensive, private and confidential, and non-adversarial in nature. It is also a process where the parties are in full control of the resolution of the dispute. In the circumstances, mediation should be the obvious choice to resolve a business dispute. In proposing to mediate a dispute, a party signals its willingness to settle the dispute through discussion and consensus.
Why should the other party agree to mediate the dispute? Mediation provides an opportunity for both parties to discuss the issues in a responsible and meaningful way, under the guidance of a neutral third party from the business sector. The mediator's business sense will enable him to ask the right questions and get to the crux of the dispute in a short time. He will then work with the parties, and guide them towards a resolution of the dispute, on their terms, without expressing any opinions of his own.
The process will reveal to each party their strengths and weaknesses in relation to the claim involved in the dispute. In many instances, the process itself shows the way forward to the parties and that is why it is necessary to accept the offer to mediate a dispute and participate in the process.
It is important to note that even if the mediation fails, each party will now know whether it can succeed in litigation or not and this will act as a deterrent to litigation. On the other hand, If the parties declined to mediate the dispute, in the first instance, one of the parties would have taken it to court, forcing both parties to spend their time and money unnecessarily until the conclusion of the case.
Therefore, it is in the interest of both parties to mediate a dispute first. Parties contemplating legal action should first consider mediation, particularly in disputes involving a vast number of documents, a series of transactions, a range of issues, complex technical issues, etc. The advantage here is that parties can directly talk to each other on matters within their knowledge, instead of relying on the costly exercise of first briefing their lawyers, filing plaint and answer, following court formalities, and attending numerous hearings etc. Even if mediation fails, the process will help to resolve some of the issues and narrow the scope of the dispute for purposes of litigation.
(Ceylon Chamber of Commerce)
News Report about Commercial Mediation
https://www.sundaytimes.lk/030112/ft/8.html
Commercial Mediation to expand to provinces
By Rajika Chelvaratnam
The Commercial Mediation Centre will expand its network of services to the provinces including Kandy, Kurunegala and Galle this year and later to Jaffna as well.
"What we are trying to do is to go out to areas that have a business concentration," said K.K. de Silva, coordinator of the Commercial Mediation Centre which operates under the Ceylon Chamber of Commerce.
This will extend the facility of solving business disputes in these areas outside the traditional court system.
At the moment de Silva said that there was no hurry to expand to the northern province as the Centre's aim is to concentrate on areas that have been having normal business activities throughout the years.
They hope to extend their services to Kandy, Kurunegala and Galle where they expect people to be interested in mediation and seek their help.
"Jaffna of course has not had any business concentration till recently. It is too premature now.....but the moment we feel there is a response we will be there," added De Silva.
"We have been trying to promote the concept of mediation and there is a certain degree of awareness at the moment, but people are still not flocking to the Centre. There is a degree of resistance so any expansion will depend on demand," he said.
Any business dispute can be referred to mediation regardless of the value of the dispute. One of the significant features of mediation is that both parties must agree to resolve the commercial dispute through the process of mediation and come to a solution that is mutually satisfying.
A person who wants to make an application for mediation would have to pay an initial application fee of Rs. 1,000 to the Centre. After the receipt of the application the Centre contacts the other party and if he wishes to proceed, then the actual process begins. The two parties will then have to make another payment called a mediation fee, which is a minimum of Rs. 5,000. This payment is calculated on the basis of one rupee for every Rs.1,000 of the value of the business dispute. The maximum mediation fee is Rs. 50,000. These costs would be shared by both parties.
After the commencement of the mediation sessions, there is a mediator's fee of Rs. 1,000, an administrative fee of Rs. 500 and the mediator's traveling costs of around Rs. 500. The total cost for a session would amount to Rs. 2,000.
Usually, commercial disputes are resolved in five or six sessions, which will amount to about Rs. 16,000 whereas if the parties decide to go to courts the preliminary expenses alone, such as consultation, may be above Rs. 10,000, De Silva said.
"This is something that is very useful to the business community," he said.
But what generally happens is that when a dispute arises in a company it is generally referred to a lawyer who takes over the responsibility for the case.
Most companies prefer to do this than enter into mediation which would involve the parties having to take the responsibility themselves. "So, the efficiency of the representative handling the dispute for the company during mediation comes into question".
The panel of mediators is equipped to handle all business disputes with representatives from the Federation of Chambers of Commerce and Industry in Sri Lanka, the Ceylon Chamber of Commerce, the Ceylon National Chamber of Industries and the Ministry of Justice.
The setting up of the Commercial Mediation Centre and the promotion of mediation as a form of Alternative Dispute Resolution (ADR) is a direct response to a long felt need of the business community for a cost effective, speedy and amicable resolution of commercial disputes.
The system facilitates the continuance of good commercial relationships and allows room for parties to commence legal proceedings if they do not reach an agreement.
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From Communities To Corporations: The Growth of Mediation In Sri Lanka
During a recent visit to Sri Lanka I was surprised to discover the widespread practice of institutionalised community mediation throughout the island republic. Then again, as I was to learn, this is a region with a strong tradition of consensus based dispute resolution at village level. In a very different context, I experienced the genuine and rapidly growing interest in and enthusiasm for private commercial mediation, particularly in the business sector.
In this article I will outline the development of modern mediation in Sri Lanka. I use the term mediation to mean facilitative mediation. Accordingly, for the purposes of this article, mediation does not include processes such as conciliation or evaluative mediation, which are used in Sri Lanka, for example in industrial dispute resolution practice.
At the outset I would like to thank the Ministry of Justice and, in particular, the members of the Legal and Judicial Reforms Project for the opportunity to work with them, share with them and learn from them.
Background to mediation in Sri Lanka
Like many Asian countries, Sri Lanka has a strong tradition of consensus based dispute resolution, the historical thread of which has from time to time been broken during periods of political upheaval. The practice of mediation in Sri Lanka dates back to the reign of the Ceylon kings, who ruled Sri Lanka prior to colonial settlement. In the former Kingdom of Ceylon the institution of Gamsabhawa (the village council) had the mandate to maintain peace and harmony at village level by facilitating the amicable settlement of disputes. Similarly, the village temple formed the traditional centre of social life and the Head Priest of the temple also took an active role in dispute resolution.
Successive foreign rulers introduced new, more formal forms of dispute resolution. Eventually the adversarial legal system based on English common law became the dominant form of formal dispute resolution in Sri Lanka, suppressing traditional mediation processes. It was not until 1958 that a serious attempt was made to reintroduce the concept of the ‘amicable settlement of disputes’ by introducing the Conciliation Boards Act 1958.
The Act provided for mandatory community level resolution of minor disputes by impartial conciliators. The objective of the Act was to make available to disputants a much more accessible, less expensive, speedy and participatory dispute management process. According to Amir-Ul-Islam, several factors (including the selection process for suitable conciliators and the mandatory nature of the Act) were the subject of great controversy within legal and political arenas at the time.1 Ensuing problems with the implementation and application of the Act ultimately led to its repeal in 1977. On the other hand, the Sri Lankan Mediation Boards Act 1988 has enjoyed a much greater success.
From the communities
Mediation in Sri Lanka today is practiced extensively on a community level. Wijayatilake 2 reports that between 1990 and 1999, 631,831 mediations took place under the Mediation Boards Act 1988. Of those, 395,268 resulted in a settlement: a settlement rate of 62.6 per cent. Essentially, the Act has institutionalised mediation at the community level in Sri Lanka.
According to the Act, mediation is defined broadly as any ‘lawful means to endeavour to bring the disputants to an amicable settlement and to remove, with their consent and, wherever practicable, the real cause of grievance between them so as to prevent a recurrence of the dispute or offence’.3 Despite the broad definition, all mediators under the Act are required to attend a training course conducted by the Ministry of Justice before they can be approved as mediators. As a result, the mediators follow a very specific facilitative mediation model as taught in the training program.
Under the Mediation Boards Act 1988, once the application for mediation has been lodged with a mediation panel, the procedure can be summarised as follows. A matter can come to mediation in one of four ways.
1. Voluntary referral Subject to a number of exceptions, parties can voluntarily refer a dispute to a mediation panel. The exceptions include where one of the disputants is the state; where the dispute relates to the recovery of any property, money or other dues on behalf of the state; or where the Attorney General has instituted proceedings for any offence.
2. Mandatory referral (civil matters) There is mandatory referral to mediation for civil disputes relating to property, debt, damage or demand not exceeding 25,000 rupees. There are a number of exceptions to this category, for example matrimonial disputes which may be dealt with in the Family Court conciliation procedures and fundamental rights applications to the Supreme Court.4
3. Mandatory referral (criminal matters) There is mandatory referral to mediation for criminal offences specifically set out in the Act. These include property offences, assault, trespass and defamation.5
4. Court referral Any court may refer a dispute to a mediation panel with the consent of the parties.
In each of the above cases, the mediation panel refers the matter to a mediation board, which comprises three mediators from the panel. The board will then decide if any interested third parties (other than the disputants) should attend the mediation, and will send the disputants and all nominated parties a notification of the mediation. Legal representatives may not attend the mediation. Neither the disputants nor other interested parties can be compelled to attend the mediation.
At the same time, if one or other of the disputants do not appear at the mediation, the certificate of non-settlement subsequently issued by the Board will state the name of the party who did not attend the mediation. Naming the non-attending party on the certificate was an amendment to s 10 of the Act made in 1997. In this way the legislation aims to persuade more parties to attend mediation meetings. At this stage no data is available to indicate the impact of this amendment.
Time limits apply for completing the mediation process. Where the parties reach an agreement, copies of the settlement document are sent to the parties or, where the matter was referred to mediation by a court, back to the court. Where no agreement is reached a certificate of non-settlement is issued. The issuing of such a certificate enables the aggrieved party to file a court action. A mediated settlement is not enforceable in a court of law, unless the matter was referred to mediation by a court.
Where one party does not comply with the mediated agreement, the other party may refer the matter back to the mediation board for a new mediation or to issue a certificate of non-settlement. Confidentiality of the mediation process is provided under the Act. In summary, the Mediation Boards Act 1988 sets up a mandatory court connected mediation scheme, whereby certain matters cannot be filed in court before the aggrieved party has applied for mediation and a mediation meeting has been arranged.
At this point, however, the mandatory nature of the process stops. In line with the grassroots, community based philosophy that mediation is a voluntary process that empowers parties to deal with their own conflicts, there is no compulsion to attend the mediation. The only sanction for non-attendance is the naming of the non-attending party in the certificate of non-settlement.
Mediators tend to be well respected members of the village community who practice an interest based model of mediation. Mediations often involve several meetings, site inspections (where, for example, the dispute is about real property demarcations) and meetings with other stakeholders. Despite the considerable success of the mediation boards over the past 15 years, the practice of mediation has remained confined to the community mediation arena.
Meanwhile, the Sri Lankan court system, based on English common law, has suffered the same fate as many court systems in the common law world ; namely, the protracted and expensive resolution of commercial disputes. As a result, disputing parties often write off losses and do not get involved in litigation.
In addition to litigation, there are a large number of commercial and civil disputes in Sri Lanka which are referred to arbitration. However, these proceedings are as lengthy and costly as litigation. Retired judges usually conduct the arbitrations at weekends or late evenings. Many local and foreign investors are therefore reluctant to start or expand business ventures in the country. This, in turn, has had, and continues to have, an adverse impact on economic growth.
Commercial Mediation
The growing discontent with the manner in which commercial disputes are dealt with in Sri Lanka has provided the impetus for a number of major judicial reform initiatives. One such initiative is the introduction of commercial mediation of disputes through the Commercial Mediation Centre of Sri Lanka (CMC). The business community anticipates that by introducing commercial mediation into the legal system, there will be an increase in the early and amicable settlement of commercial disputes, leading to faster and more cost effective resolution of business disputes.
Further, the business community expects that the demonstrated ability of Sri Lankans to deal with business disputes in a commercially sensible manner will lead to increased confidence among investors, both local and foreign, in the legal system and the economy of Sri Lanka.
The Legal and Judicial Reform Project (the project) in Colombo, Sri Lanka, is the driving force behind the significant legal reform projects including the introduction of commercial mediation into Sri Lanka. The project members adopted the view that if mediation were to have a real chance of success in the private commercial sector, it needed the support of the business community. Accordingly, the project consulted with representatives of the various Sri Lankan Chambers of Commerce.
At the same time, the project liaised with the Bar Association and the law schools of the various universities in Colombo. According to anecdotal evidence, the response from the business community was positive and motivated, the universities displayed curiosity and the Bar Association responded in a lukewarm ‘keep us informed’ manner. After a series of consultations and meetings, a mediation group was formed with representatives from the various Chambers of Commerce, the Bar Association and the University of Colombo in December 1998. The group formulated a mediation model and procedures as well as guidelines for a Sri Lankan Commercial Mediation Centre.
The centre has now been established under an Act of Parliament, namely, the Commercial Mediation Centre of Sri Lanka Act 2000. Essentially the Act provides for the establishment of the centre, its structure, functions and powers. Under s 3 of the Act, the functions of the centre are:
to promote the wider acceptance of mediation for the resolution of commercial disputes;
to encourage parties to use mediation as a means to resolve commercial disputes; and
to conduct mediations.
The Act also provides for a Board of Management, consisting of representatives from the various Chambers of Commerce and the Ministry of Justice. There is no requirement that the legal profession be represented on this Board. The Board is responsible for the development and regulation of guidelines for the mediation process, the code of conduct for mediators and the determination of fees payable to mediators and the centre. So, what has the Board done so far?
Acknowledging the experience of the community mediation boards, the Board of Management of the Commercial Mediation Centre chose to employ a completely voluntary, interest based mediation process and to restrict the involvement of lawyers in the process. Both these criteria were considered by the Board to be critical for the success of a dispute management process designed to provide a real alternative to litigation and arbitration.
First, the feeling among the business community was that if lawyers were involved in mediation, then it would only be a matter of time before mediation met the same fate as arbitration. Arbitration was, of course, introduced as a speedy and less expensive alternative to litigation, yet it quickly developed into a process as lengthy and costly as litigation itself. Further, the business community feared the involvement of lawyers would make the use of mediation less attractive for disputing parties. Cervenak reports on the findings of a consultancy paper prepared by the Asia Foundation on commercial arbitration in Sri Lanka. The paper concluded that a strong anti-litigation bias existed in the business community, particularly in the outstations among small and medium sized businesses.6
Second, as mediation is a process based on consensus between the disputing parties, it was felt that credibility of the process in the business community would be enhanced if it was supported and utilised by the business community on a voluntary basis. In other words, if mediation as a dispute management process really did make business sense, then the business community would use it and continue to evolve it into a best practice dispute management tool. Making the process mandatory, it was felt, would place too much regulation on the process too early and take it out of the hands of the customer, that is, the business community.
The development of institutionalised mediation in Sri Lanka since 1958 to the present day indicates a distinct trend away from mandatory towards voluntary mediation processes that do not involve lawyers. It is still far too early to comment on the success of the Sri Lankan commercial mediation initiative. In essence, its success depends on the efforts of the business community, in particular, the various Chambers of Commerce, to ‘walk the talk’ by referring their disputes to mediation and committing to the process in good faith.
Endnotes
1. Amir-Ul-Islam M Status of Mediation in Bangladesh in the Sub-Continental Settings Compilation of papers on alternative dispute resolution in the SAARC region, Bhutan April 2000.
2. Wijayatilake D Alternative Methods of Dispute Resolution in Sri Lanka Compilation of papers on alternative dispute resolution in the SAARC region, Bhutan April 2000.
3. Section 10 Mediation Boards Act (No 72 of 1988).
4. Exemptions are set out in the Mediation Boards Act 1988, Third Schedule.
5. Mediation Boards Act 1988, Second Schedule.
6. Cervenak C Commercial Arbitration in Sri Lanka: Constraints and Opportunities Report prepared for the Asia Foundation 1999.
Read more about Commercial Mediation here:
https://www.google.com/url?q=http://dl.lib.uom.lk/bitstream/handle/123/17037/MEDIATION%2520AS%2520AN%2520ALTERNATIVE%2520DISPUTE%2520RESOLUTION.pdf%3Fsequence%3D1&sa=U&ved=2ahUKEwjn6MzHxf6BAxWbzTgGHQZ-CucQFnoECAYQAg&usg=AOvVaw1tsxXK3OP754nXcPbK_rB_
By
Mahesh Abeynayake
Department of Building Economics, University of Moratuwa, Sri Lanka
Chitra Weddikkara President, Sri Lanka Institute of Architects.
(Ms. Weddikkara was a member of the original Panel of Mediators.)
https://medium.com/@gunathilakasara/mediation-in-sri-lanka-the-legal-framework-85c449a7b50e
http://archives1.dailynews.lk/2017/01/10/business/104268/commercial-mediation-ceylon-chamber-commerce
https://www.worldbank.org/en/news/feature/2017/11/21/three-new-guides-on-commercial-mediation
[i] Sri Lanka - Legal and Judicial Reforms Project (worldbank.org)
Read about it here :
07. The Mediation (Settlement of Civil and Commercial Disputes) Bill
The Parliament has passed the Commercial Mediation Centre Of Sri Lanka Act No. 44 of 2000 to establish a Center for Commercial Mediation. However, the said Act has not been able to fulfill its intended purpose due to various technical reasons and certain restrictions. At present, voluntary mediation is adopted by many countries to resolve disputes and the most of those countries have taken steps to introduce rules and regulations for voluntary mediation.
Those countries have also enacted laws required to empower their courts to take action against parties who refuse voluntary mediation without acceptable reasons.
Accordingly, the Cabinet of Ministers approved the proposal presented by Minister of Justice, Prison Affairs and Constitutional
Reforms to initiate for the formulation of Mediation (Settlement of Civil and Commercial Disputes) Bill that repeal the Commercial Mediation Centre Of Sri Lanka Act No. 44 of 2000, and to provide for the provisions of the Act on Voluntary Arbitration of Civil and Commercial Disputes and for matters incidental thereto.
Period of Service 20 May 2002 to 15 October 2004
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